Background: Chromosomal inversions are increasingly being recognized as important in adaptive shifts and are expected to influence patterns of genetic variation, but few studies have examined genetic patterns in inversion polymorphisms across and within populations. Here, we examine genetic variation at 20 microsatellite loci and the alcohol dehydrogenase gene (Adh) located within and near the In(2L)t inversion of Drosophila melanogaster at three different sites along a latitudinal cline on the east coast of Australia. Results: We found significant genetic differentiation between the standard and inverted chromosomal arrangements at each site as well as significant, but smaller differences among sites in the same arrangement. Genetic differentiation between pairs of sites was higher for inverted chromosomes than standard chromosomes, while inverted chromosomes had lower levels of genetic variation even well away from inversion breakpoints. Bayesian clustering analysis provided evidence of genetic exchange between chromosomal arrangements at each site. Conclusions: The strong differentiation between arrangements and reduced variation in the inverted chromosomes are likely to reflect ongoing selection at multiple loci within the inverted region. They may also reflect lower effective population sizes of In(2L)t chromosomes and colonization of Australia, although there was no consistent evidence of a recent bottleneck and simulations suggest that differences between arrangements would not persist unless rates of gene exchange between them were low. Genetic patterns therefore support the notion of selection and linkage disequilibrium contributing to inversion polymorphisms, although more work is needed to determine whether there are spatially varying targets of selection within this inversion. They also support the idea that the allelic content within an inversion can vary between geographic locations.